Dive Brief:
- Dollar General exited four temporary warehouse facilities in Q3 in a continued effort to improve its distribution capacity and efficiency, CEO Todd Vasos said on a Dec. 5 earnings call.
- The discount retailer has now closed 15 such sites within the last 12 months, Vasos told analysts. It plans to close out the remaining three temporary facilities in its network next year.
- “By closing these temporary facilities, we are able to improve overall efficiency in our supply chain while also reducing costs,” the CEO said.
Dive Insight:
Dollar General has spent much of 2024 optimizing its supply chain after years of rightsizing inventory.
The company said it already exited 11 temporary warehouses and initially expected to close two more this year during a Q2 earnings call.
“By closing these temporary facilities, we are able to improve overall efficiency in our supply chain while also reducing costs,” Vasos said.
As it shutters temporary sites, Dollar General has expanded its owned facility footprint, adding distribution centers in Colorado and Arkansas this year. Prior to those openings, Dollar General operated 32 distribution centers, 15 of which were leased, according to its latest annual report.
Beyond adding new facilities, Dollar General is also upgrading its distribution center operations. The company implemented automation technology at its newly opened Arkansas facility following a similar rollout at a South Carolina site last year, Vasos said.
The augmentations are expected to reduce stem miles — the distance from distribution center to delivery destination — by approximately 4% year over year, Vasos noted. In addition, Dollar General’s overall supply chain efforts have helped it improve its on-time delivery rate by 470 basis points and its in-full rate by 900 basis points year over year in Q3.
“Over time, we believe automation in these facilities can increase efficiency for our teams, optimize storage in the facility and drive even greater inventory and order accuracy to further enhance the way we serve our stores,” the CEO told analysts.
To further enhance efficiency, Dollar General also began refreshing the sorting process within its distribution centers for the first time since 2017 this year, according to Vasos.
“As a reminder, the ultimate goal of this effort is to enable our store teams to stock shelves more quickly, which should drive greater on-shelf availability for our customers and ultimately support ongoing sales growth,” Vasos said.
